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DirecTV Slapped with Injunction on Dealer Case

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A California Superior Court judge entered a temporary restraining order prohibiting DirecTV from engaging in certain conduct with DirecTV dealers until the court holds a preliminary injunction hearing on March 8.

The order, as reported by the Los Angeles law firm of Baron & Budd, prohibits DirecTV from communicating with retailers regarding "amendments to the sales agency agreements or ... altering or modifying or enforcing purported alterations or modifications of the sales agency agreements" until the March 8 hearing.

The order was entered in a lawsuit, filed last October, which alleges that DirecTV is withholding compensation from present and former DirecTV retailers by using accounting methods designed to underpay and overcharge dealers. More than 11,000 DirecTV retailers are affected, said Allen M. Stewart, counsel to the plaintiffs and a shareholder in Baron & Budd.

"DirecTV has knowingly and systematically driven independent DirecTV dealers out of business by unilaterally changing the payment terms of the agreement with a take-it-or-leave-it approach," Stewart said. "DirecTV continually pressured the dealers to either take a bad deal or be terminated as a dealer."

The lawsuit alleges that DirecTV agreed to pay retailers commissions on new subscriber installations, as well as residual monthly income based on the subscribers' monthly payments. The plaintiffs allege that DirecTV is withholding past and present dealers' commissions and residual payments and seeks more than $300 million in damages.

In response, DirecTV said attorneys representing retailers in the case are "attempting to leverage a settlement, which they hope will result in tens of millions of dollars of profit for themselves."

The company added, "attorneys representing the plaintiffs in this case have been urging other independent dealers to hop on the bandwagon and join the legal action because of the planned merger with EchoStar. The lawyers sent a letter to retailers last month claiming that 'oftentimes, mergers of this nature result in the conclusion of outstanding litigation matters' and 'we believe acting promptly may increase our chances of a successful outcome.'"

DirecTV said the court "clearly has concerns" about the lack of evidence, among other things, and has asked for a more in-depth briefing from both sides on March 8. "The court expressly stated that it was not making any finding that DirecTV had intimidated retailers or acted coercively," the company said.